The Comparative Value of Money between Britain and the Colonies

When the English colonists arrived in America they naturally continued to use the monetary units of Britain, namely the pound, shilling and pence for which £1 equalled 20s and 1s equalled 12d. This appeared to be a simple transplantation of economic units, but due to British colonial policy the situation became quite complex. Basically, British policy was guided by the supposition that its colonies would contribute revenue and stimulate industrial growth by providing both raw materials and markets for British mercantile expansion. In return the colonies would be protected by British arms and civilized by British rule. Toward this end parliament enacted laws prohibiting the export of British silver coinage as it was felt the colonies should be providing Britain with precious metals rather than draining them away. The result of this policy was that British silver coins were quite scarce in the North American colonies.

This problem was critical as it adversely affected local commerce and forced the colonists to turn to foreign coins, primarily Spanish American silver produced in Mexico and Peru. The most widely used coin in the colonies was the eight reales (piece of eight), primarily clipped underweight examples that had made their way north from Mexico through the Bahamas. The eight reales was the highest unit of Spanish silver in the New World, similar in size and weight to the thalers of the various German states, the French écu, the Portuguese cruzado and the ducatoon of Holland; colonists called the eight reales coin a "dollar," from the Dutch "daalder" (a derivative of the German thaler).

As there were not enough of these coins in circulation to sustain commerce, the first colonists turned to barter transactions as well as the use of wampum and commodity monies like tobacco as mediums of exchange. However, these substitutes were not acceptable to British exporters providing colonial merchants with British goods. Colonial merchants needed to pay British exporters in silver, resulting in a severe drain on an already scarce commodity. As the demand for silver coinage far exceeded the available supply, silver coins traded at a premium. The Spanish silver dollar was authorized to be produced at about 420 grains of .9350 fine silver. Based on the British standard that one troy ounce of silver was valued at 62d (5s2d) in British sterling (that is .925 fine silver) the value of a Spanish dollar was 54d (4s6d). The premium above the 54d level was termed the "crying up" of the coinage. The first legislated premium was passed by the Massachusetts General Court on June 14, 1642 increasing the value of the Spanish dollar by 3% to 56d (4s8d). Three months later, on September 27th the value was further increased to 60d (5s) or 11% above the London rate. When Massachusetts began minting silver coins in 1652 they reduced the British sterling standard by 22% from 92.6 grains per shilling to 72 grains to keep their Massachusetts silver coins in the colony. But even at this level of "upcrying" the value of silver coins continued to increase. Interestingly, even before the Boston mint closed in 1682 the colony of Massachusetts Bay had raised the value of Spanish silver to a level above the 22% "upcrying" of their own coins! In 1672 Massachusetts valued the Spanish dollar at 72d (6s) or 33% above par (parity with Britain). In 1682 Massachusetts reduced the rate to 66d (5s6d) per Spanish dollar, so it would be on par with Massachusetts silver but in 1692 they once again raised its value back to 72d (6s). This remained the official legislated rate but Spanish American dollars sometimes traded at even above this legislated rate. In fact in 1692, the year in which Massachusetts once again legislated the value of the Spanish dollar at 72d (6s), the coin is recorded to have passed in trade in New England at 74d (6s2d) or 36% above par and in 1705 it was recorded to have passed at 83.6d or almost 84d (7s), that is 55% above par (see Mossman, table 6, pp. 62-63).

With the "crying up" of silver coins the legislated value of the monetary units in Massachusetts and London differed. For example, in Massachusetts in 1704 a British shilling was legislated at 33.33% more than a Massachusetts shilling, so that a British shilling would pass at 16d (1s4d) in Massachusetts, whereas a Massachusetts shilling would be 12d (1s). Of course this problem was not limited to Massachusetts. Each colony functioned as an independent government creating their own laws and regulations. Every colony used the monetary units of pounds, shillings and pence but they each legislated their own premium or "crying up" for silver coinage. The result was the value of these units (pence, shilling and pound) were not on par with Britain and, to add to the confusion, their value differed in different colonies. This is somewhat comparable to the Franc, a monetary unit currently used in France, Belgium and Switzerland but with very different values; similarly the British, Massachusetts, Pennsylvania and Virginia shillings had different values.

Further, except for the Boston mint of 1652-1682, the colonies did not produce any significant quantity of coinage. Rather, in colonial America most silver coinage in circulation came from Spanish America, Spain, the Netherlands, the German States, France and other foreign countries. Colonists were able to use these coins within their monetary system of pounds, shillings and pence because Britain set exchange rates between sterling and many foreign coins. For example, in 1702 a general assay was undertaken by the director of the Royal mint, Sir Isaac Newton (for details see the 1702 Assay section). The value of each major foreign silver coin was calculated based on the fineness of the silver and the weight of the coin in relation to the value of one troy ounce (480 grains) of sterling silver, which was 62d (5s2d). Among the determinations made during this assay was that the Dutch 40 stuiver "Lion dollar" (at 14 dwt. 2 gr. 7 mi. sterling) was valued at 44d (3s8d) and the 63 stuiver "Silver rider" ducatoon (at 21 dwt. 3 gr. 15 mi.) was valued at 66d (5s6d) Using this information a colonist could then calculate the difference between the sterling value and the percent of "upcrying" legislated by that colony for any foreign coin. For example, under the 55% "upcrying" in 1705 in Massachusetts an unclipped Spanish dollar was valued at 55% above the sterling rate of 54d (4s6d) which came to 84d (7s) and a full weight Lion dollar of Holland (at 44d or 3s8d sterling) was about 68d (5s8d); thus an article costing 24s could be purchased for one Spanish dollar and three Lion dollars. In practice then, colonists used reales, stuivers, écus, thalers and other foreign denominations for their actual currency. There was no coin called a Virginia or a Pennsylvania "shilling."

The colonial monetary units of pounds and shillings were simply a bookkeeping system or what is called a "money of account" used to keep track of the various foreign denomination coins in circulation. That these "monies of account" were not on par with British coinage and that there value differed between the colonies made business quite cumbersome, especially for English exporters attempting to trade with the various colonies. The continual "upcrying" of silver made bookkeeping difficult but, from the British perspective, what was even worse was that it also induced colonists to keep their silver in the colony where its value was ever increasing rather than to spend it on British imports. In response to these concerns by British merchants and exporters, Queen Anne issued a royal proclamation in 1704, passed into law by parliament in 1707. The proclamation specified that a full weight Spanish dollar valued at 54d (4s6d) sterling would pass in the colonies at 72d (6s), which was a third above the sterling rate. Further the colonists were prohibited from trading any silver coins at more than a third (33.33%) above the British sterling rate.

There was extensive and continuous opposition to this law in the colonies. The colonial exchange rate of the Spanish dollar and other silver coins continued to fluctuate based on the legislated rates in the colonies rather that the rate decreed in the 1704 proclamation.
In Virginia the Spanish dollar remained at 60d (5s) from 1655-1710, which was after the proclamation rate had become law. In 1710 the London Board of Trade and the Privy Council allowed a 1708 Virginia law to stand which valued underweight Spanish dollars at 60p (5s) and full weight coins at 65.5p (5s 5.5p), so the authorized "upcrying" of a Spanish dollar in Virginia was still only a 20% increase over the sterling rate (McCusker, 205-206). In New York from 1684 through at least 1700 the Spanish dollar passed at 81d (6s9d), a 50% increase over sterling. In 1708 the legislature tried to raise the rate of Spanish dollars minted in Mexico or Seville by increasing the value of an ounce of silver in those coins to 96d (8s) or 55% over sterling, which put the eight reales dollar at 84d (7s). By this same law the more debased Spanish dollars from Peru were given a lower value based on a rate of 80d (6s8d) per ounce of silver. These rates were not approved by the Board of Trade but the market value of the Spanish dollar continued to rise; by the 1740's the Spanish dollar was trading at 96d (8s), a 78% increase over sterling (McCusker, 157-159). In Massachusetts, although the Spanish dollar was legislated at 7d (6s), in 1705 it is recorded at trading just under 84d (7s), a 55% increase over sterling (McCusker, p. 132 and Mossman, p. 63). In the Carolinas, which were not divided until 1712, the Spanish dollar was valued at 60d (5s) until 1683 when it was legislated at 72d (6s), for a 33.33% increase over sterling. In 1691 the rate was raised again to 81d (6s 7.5d) or a 50% increase over sterling and it remained there until 1712. Thereafter, the value escalated higher, especially in South Carolina (McCusker, p. 214 and Mossman, pp. 62-63). In Pennsylvania the Spanish dollar was valued at 72d (6s) in 1683 and rose to 74d (6s2d) in 1693 and then to 94d (7s 10d) in 1700, which was a 74% increase over sterling. In 1709 Pennsylvania valued the Spanish dollar back to 72d (6s), which was the proclamation rate of 33.33% over sterling, however by the 1742 the dollar was trading at 90d (7s6d), a 66.66% increase over sterling. (McCusker, pp. 175-176 and Mossman, pp. 62-63). Maryland actually traded dollars at the proclamation standard of 72d (6s) which was the one third or 33.33% increase over sterling. The only other colony to conform, during this period, was Virginia where the royal governor finally forced the House of Burgesses to accept the proclamation rate in 1710.

Generally, colonial rates fluctuated upward through about 1750. Thereafter, with the exception of the Revolutionary War era, rates somewhat stabilized with New England, Virginia and the south adhering to the proclamation rate of a one third or 33.33% "upcrying" so that a Spanish dollar traded at 72d (6s). Currency issued at this rate was known as "Lawful Money" as it conformed to the legal statutes. New England paper currency sometimes abbreviated this phrase as L.M. in the text of the note. In the south the term used was "Proclamation Money" recalling Queen Anne's 1704 proclamation. Also, as this was the currently imposed rate, notes issues at this rate were called "Current Money" (not to be confused with the expression "pass current" found on many notes from the middle colonies).

The Middle colonies of Pennsylvania, New Jersey, Delaware and eventually Maryland did not adopt this rate. These colonies agreed to mutually set rates in order to facilitate commerce throughout the region. Over time they came to set the exchange rate for a Spanish dollar at 90d (7s6d) which was a two thirds or 66.66% increase over sterling. To distinguish this two thirds rate from the one third "Proclamation or Current Money" rate it was referred to as the rate in "Common Money" or "Pennsylvania Money." New York was somewhat independent and created their own rate of 96d (8s) to the Spanish dollar or a 78% increase over sterling.

Expressed in terms of the value of a Spanish dollar the exchange rates in the later colonial period would be as follows:

4s6d British = 6s Massachusetts = 7s6d Pennsylvania = 8s New York

Expressed in terms of the value of a pound sterling the exchange rates would be: